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Editor鈥檚 note: This article is part of听Something Ventured, an ongoing project by 附近上门 News examining diversity and access to capital in the venture-backed startup ecosystem. As part of this series on venture funding to Black entrepreneurs, we also look at Georgia’s role as a growing startup hub for Black startup founders and the state of VC funding to startups led by Black women. Access the full Something Ventured project here.听

still remembers being the only Black startup attorney practicing on Silicon Valley鈥檚 Sand Hill Road.

That was 25 years ago. Earlier this year, Moore raised $223 million in growth capital for , marking one of the largest funding rounds ever to a startup founded by a Black entrepreneur.

While venture funding to Black startup entrepreneurs in the U.S. remains woefully small, 附近上门 numbers show a significant uptick over the past year that coincides with the racial justice movement that reignited across the country.

Funding to Black entrepreneurs in the U.S. hit nearly $1.8 billion through the first half of 2021 鈥� a more than fourfold increase compared to the same time frame last year. Led by funding to early-stage startups, this year鈥檚 half-year total has already surpassed the $1 billion invested in Black founders in all of 2020 and the $1.4 billion invested the year before that.

Entrepreneurs and investors who spoke with 附近上门 News say several factors are driving more positive change after years of painfully slow progress.听

For one, more Black investors are being elevated to partner level at venture firms or are spinning up their own funds to provide capital to a more diverse set of entrepreneurs. A handful of high-profile exits along with large late-stage rounds to Black-led companies are also paving the way for more up-and-coming startups.听

And in a hypercompetitive dealmaking environment, venture capitalists are looking outside their normal social and geographic spheres for promising startups to fund.

But perhaps more than anything, it was George Floyd鈥檚 murder last summer 鈥斕齛nd the ensuing racial justice movement 鈥� that lit a fire under Silicon Valley.

鈥淚 haven’t seen this amount of interest and conversation in the business community at large about race since the anti-apartheid movement of the 鈥�90s,鈥� said Moore, whose company offers low-cost online legal services to individuals and small businesses.

To be sure, much work remains to be done. Black startup entrepreneurs still received only a tiny fraction 鈥� 1.2 percent听 鈥� of the record $147 billion in venture capital invested in U.S. startups through the first half of this year, 附近上门 numbers show. That compares with the of the U.S. population that is Black or African American.听

Early-stage leads

Still, investment in Black-founded startups as a percentage of overall U.S. venture funding has doubled since 2020, when it was a meager 0.6 percent.

Most promisingly, early-stage funding has led the way in 2021, with the largest proportion of venture capital investment to Black-founded companies at the Series A and Series B stages.

Several of those early-stage fundings were very large Series A and B investments, such as to Atlanta-based scheduling platform , a in Southern California-based fashion brand and to New York-based agtech company .听

In total, 附近上门 numbers show 35 Black-founded companies raised Series A or B rounds in the first half of 2021, including 10 deals of $20 million or more.

While early-stage venture funding lays a foundation for the next cohort of successful startups, later-stage rounds and successful exits offer the kind of validation that traditional venture investors look for when placing their next bets.

鈥淚 hope that we鈥檝e set an example as being good stewards of capital for traditional venture funds,鈥� said Moore. In April, Rocket Lawyer raised a $223 million growth round led by that he said represented a strong return on investment for early investors in the company including , , and others.

鈥淲e’ve shown that a company with a team that’s really dedicated to a mission can succeed with a Black founder and CEO, but it takes the whole ecosystem to do it,鈥� he said.

This year also marked the first public-market debut for a venture-backed company in the U.S. with a Black founder and CEO: Real estate brokerage , led by , went public in April and was valued at $8 billion after the stock鈥檚 first day of trading, although that figure has recently dropped to around $5 billion.听

A Catalyst

Floyd鈥檚 May 2020 murder at the hands of a white police officer sparked widespread cries for racial justice as well as a call for better access to capital and economic opportunity for Black Americans.

Racial inequity in the U.S. runs deep and across generations. The country鈥檚 median white household is 7.8x wealthier than the typical Black household 鈥� $188,200 vs. $24,100 鈥� and Black Americans hold just 4 percent of the nation鈥檚 wealth.

The contrast is even starker when it comes to who receives venture funding. That matters because venture capital is the lifeblood of the startup ecosystem, which increasingly serves as a gateway to wealth and prosperity in the U.S.

Startup entrepreneurship 鈥渋sn’t easy for anybody, regardless of race or gender,鈥� Moore said. 鈥淚nvention, let alone commercializing an invention at scale, isn’t easy for anybody. We have to always remember that, and then think about the fact that it’s not going to be easy for anybody, but how do we at least level the playing field so that everybody can have the same opportunity?鈥�

Last summer鈥檚 racial reckoning prompted many venture investors to increase commitments to funding Black founders, and the numbers seem to indicate some results 鈥� at least in the near term.听

While just $442 million was invested in Black-founded startup founders in the first half of 2020, 附近上门 data shows that increased to $589 million in the second half of the year. That momentum continued into 2021, with at least $1.8 billion invested in the first half of this year.

One of the venture funds that launched in the aftermath of Floyd鈥檚 death was SoftBank Group鈥檚 , a $100 million investment vehicle that backs Black, Latinx and Native American startup founders.听

The fund came together within 48 hours once the firm decided to act, according to , a principal at the fund, and was 鈥渞eally in response to the public protest at the time, and the outcries and examination that a lot of companies and individuals are going through thinking about systemic racism and the effects of it on personal lives.鈥�

Roughly half of the fund has already been invested in 50 U.S. companies, including . The majority of these have been seed-stage investments.听

Williams said SoftBank believes its vast network in the startup world can help those companies further accelerate their growth. Some of the fund鈥檚 portfolio companies are already planning another funding, just eight to 10 months after raising.

Black-led raised a $250 million Advancement Initiative fund, announced in March, to invest in high-growth-stage companies. The fund is set up to help historically Black colleges and universities 鈥� which typically don鈥檛 have large endowments 鈥� and organizations focused on supporting diverse talent. To date, five HBCUs are signed up as LPs, according to , who recently joined the fund. The firm does not take fees or carry from HBCUs investing in the fund, but does from other limited partners. It also donates a further 50 percent of its carry on these funds to HBCUs.听

The goal is to provide for students going forward.听

鈥淭hey’re serving low- and middle-income students primarily, right, so there’s a lot of support that they need to provide to their students,鈥� said Fonseca, speaking about HBCUs that are punching above their weight given how small endowments are for these colleges. 鈥淥ur hope is that we’ll have the capital back to the schools, you know within three to four five years versus 10.鈥�

鈥楻epresentation and autonomy鈥�

Many of the people we spoke with for this article said one key to greater racial parity in startup investing is more diversity among VCs: The more Black investors writing checks, the more investment in Black entrepreneurs.

鈥淚t’s just a natural thing to invest and want to work with things and people that we have a lot of commonalities with,鈥� said , a co-founder and managing partner at and former director of investments at .听

His Los Angeles- and Palo Alto-based firm, founded by a majority Black team, raised its inaugural seed fund of $110 million earlier this year.

MaC Venture isn鈥檛 focused solely on investing in people of color, Nichols said, but rather seeks to back startups working on overlooked problems that can lead to big 鈥渃ultural shifts,鈥� whether they be consumer-facing or enterprise technologies. The fund has invested in roughly 36 companies since it first started deploying capital in July 2019.

Many of the startup founders it has backed just so happen to be Black, Brown or women.

鈥淯sually, the best people to create solutions, or see challenges, or to go after opportunities, are the folks that have lived through or have significant experience with those challenges and the underlying opportunities,鈥� Nichols said. 鈥淚f we’re taking a look at Black culture or Latinx culture and trying to solve some of their biggest pain points, we鈥檇 be idiots to ignore entrepreneurs that are coming from those communities.鈥�

Diverse founders tend to seek the firm out, Nichols said: 鈥淭hey know that we’re going to take a good, hard look 鈥斕齛 real look 鈥斕齛t what they’re building and who they are and have an understanding of their experiences.鈥�

Black representation in the VC ranks increased slightly in the past year, from an estimated 3 percent of investors to 4 percent this year, according to , an organization that aims to help double the number of Black venture investors by 2024.

鈥淲hile 1 percent may not seem meaningful, I can tell you as an investor leading and working in this community 鈥� as a Black man operating in this community 鈥� that 1 percent is something that we all feel,鈥� said BLCK VC co-founder , speaking last month at a virtual panel discussion hosted by the group.

Although those single-digit percentages are still too small, the industry is showing 鈥渟hifts happening in its core,鈥� said Groce, who is also a partner at Palo Alto-based 听

The percentage of junior-level venture investors in the U.S. who are Black has increased from 5 percent to 7 percent in the past two years, he said, representing a rising class of future partners who will be more diverse than their predecessors.

Among BLCK VC鈥檚 programs are its , which helps Black executives become angel and venture investors, and , a nine-week program to help early-career professionals move into the VC industry.

鈥淚’m just adamant that it’s really about representation and autonomy,鈥� Nichols said. 鈥淪o not just hiring, but actually giving folks like me the power to actually make a difference.鈥�

Black-led megafunds emerge

It was just three years ago, in 2018, when and the were the first two Black-founded venture firms to raise funds above $100 million.

This year alone, , and MaC Venture Capital 鈥� all firms with Black partners 鈥� have each raised funds above $100 million for the first time.

鈥淭he biggest change has been that downstream capital is just moving at a pace we’ve never seen for people of color,鈥� said , co-founder and managing partner at New York-based Harlem Capital.

Five years ago, he was amazed when a Black founder raised a $6 million round, he said. Now companies are raising multiple $100 million rounds.听

The firm, founded in 2015, invests in Black, Latinx and female founders and has completed its 28th investment from its first fund. It鈥檚 now preparing to deploy its second fund across 40 to 45 companies with $1 million to $2 million checks for around 10 percent to 15 percent ownership.听

Pierre-Jacques expects dealflow in 2021 to double versus last year, and expects to close another three deals this year, on top of the 15 investments made halfway through the year.

The firm raised $30 million from corporations including听 , , and for its March 2021 Fund II announcement of $134 million, he said. The fund came together in five months.听听

Role of corporations

Increasingly, corporate America is playing a role in funneling money to such diverse funds, and in turn, diverse founders, with Apple, Bank of America, PayPal and all making commitments in the past year to invest millions of dollars in diverse fund managers.听

鈥淚t is really helpful if you’re raising a $30 million fund, and corporations come in for $15 million in your first close,鈥� Pierre-Jacques said.

Much of the newfound interest in investing in Black-led funds also stems from limited partners chasing returns, Nichols of MaC Venture said. His firm鈥檚 inaugural fund performs in the top 2 percent for its vintage, he said.

鈥淪carcity drives value in a lot of ways,鈥� he said. 鈥淎nd if traditional LPs are starting to see competition from places where they traditionally hadn’t seen competition, that FOMO is going to start to soak in and they’re not going to want to miss out on the next that happens to be a Black-led fund.鈥�

鈥楴ot yet meaningful enough鈥�

While the figures for Black founders and funds are moving in the right direction, they鈥檙e still a long way from being representative. Many industry leaders worry that nothing has fundamentally changed 鈥� that a year from now, we鈥檒l be having the same conversations all over again.

Crucially, they say, Silicon Valley鈥檚 incumbent class of largely white, mostly male investors need to expand their horizons and start writing more checks to startup founders who are not like them.

鈥淲e want to make sure that the next leaders of the tech ecosystem of the U.S. reflect the diversity of our nation,鈥� BLCK VC co-founder said at the group鈥檚 event last month. 鈥淎nd that means that we need to have more Black entrepreneurs. Still only about 1 percent of venture-backed founders are Black. That change is not yet meaningful enough. We believe that institutional changes result from the changes in our networks. Do the people we interact with today, the entrepreneurs we fund, the friends we interact with 鈥斕齛re those different from a year ago? I don’t know if that’s true yet.鈥�

附近上门 Pro queries referenced in this article

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• . (19)
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Update: on Aug. 4, 2021: was added to the chart for U.S. Black-founded private unicorns.

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